Lockheed agrees on price cuts for next 71 F-35s

Lockheed Martin has agreed to reduce prices on orders for the next 71 F-35 Joint Strike Fighters by between 4% and 8%, to avoid seeing production fall due to the US military's planned budget cuts.

The agreement reached with the F-35 Joint Program Office after a six-month negotiating process applies to the next two lots of low-rate initial production, named LRIP-6 and LRIP-7, Lockheed says. The LRIP-6 prices are reduced by 4% compared to the fifth lot of production signed in December 2012. Lockheed also agreed to reduce the cost of the aircraft ordered under LRIP-7 by another 4%.

Lt Gen Chris Bogdan, F-35 programme executive officer, says the "cost arrow is moving in the right direction", but that he wants prices to continue to fall in subsequent production lots.

Lockheed will begin delivering 36 F-35s to the USA and foreign customers under LRIP-6 in mid-2014, followed by 35 deliveries in LRIP-7 starting in mid-2015. The foreign customers include conventional F-35As ordered by Australia, Italy and Norway, and a fourth short take-off and vertical landing F-35B to be ordered by the UK.

The agreed prices, which were not disclosed, do not cover the cost of the F-35's Pratt & Whitney F135 engine, which is being negotiated separately, Lockheed says.

Lockheed already has 95 F-35s on contract for the first five lots of production, with 28 still undelivered.

It took both sides more than a year to negotiate the pricing for F-35s ordered under the LRIP-5 contract, so Lockheed says it was pleased by the pace of the six-month process for LRIP-6 and LRIP-7.

"We know how critical aircraft production is to meeting our servcies' initial operational capability dates, beginning with the [US] Marine Corps in 2015 and we're committed to making that happen," says Lorraine Martin, Lockheed's F-35 vice president and general manager.